$13T Chinese Bond Market Makes Debut on Major Global Index

Chinese bonds made their debut on the Bloomberg Barclays Global Aggregate Index on Monday–a move that would give investors more access to China’s $13 trillion bond market. Markets analysts are expecting that this inclusion would garner a capital influx of $150 billion in foreign inflows.

Over the course of the next 20 months, these Chinese bonds will be added to the global index. Bonds that will be included in the index are the following:

  • Chinese government: 159
  • China Development Bank: 102
  • Agricultural Development Bank of China: 58
  • Export-Import Bank of China: 45

“Today marks an important milestone as China’s capital markets continue to find their place in the global investment mainstream,” said Justin Chan, HSBC’s co-head of global markets in Asia Pacific.

China is becoming less resistant to safeguarding its businesses, which will open the pathways to more foreign investment. China ETFs have also been the beneficiaries of index provider MSCI Inc. announcing recently that it would quadruple its weighting of large-cap Chinese shares in its benchmark indexes.

A recent MSCI Inc. press release said the index provider would increase the weight of China A shares by upping the inclusion factor from 5 percent to 20 percent.

 Related: China ETF ‘CHIQ’ Up 25.52% YTD

ETFs to Consider

One ETF to consider is the Xtrackers Harvest CSI 300 China A ETF (NYSEArca: ASHR) as a way for investors to gain exposure to China’s biggest, best and most authentic equities.

ASHR seeks investment results that track the CSI 300 Index that is designed to reflect the price fluctuation and performance of the China A-Share market. In essence, it’s composed of the 300 largest and most liquid stocks in the China A-Share market, including small-cap, mid-cap, and large-cap stocks.

“The MSCI, which is the mothership of all indexes around the world just started allowing Chinese stocks in their major indexes, but just to a small degree,” said ETF Trends CEO Tom Lydon. “If you want to get right to the heart of China as far as to what’s going on specifically, if you feel that a trade deal is coming, ASHR is the best way to go.”

Will more investor interest in the Chinese bond markets benefit equities as well with international equities gaining strength over U.S. equities?

For investors looking for continued upside in U.S. equities over international equities, the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI) offers them the ability to benefit not only from domestic U.S. markets potentially performing well, but from their outperformance compared to international markets.

Conversely, if investors believe that international markets will outperform U.S. domestic markets, the Direxion FTSE International Over US ETF (NYSEArca: RWIU) provides a means to not only see international markets perform well, but a way to capitalize on their outperformance compared to the U.S. markets.

For more market trends, visit ETF Trends.